Morgan Stanley quarterly profit up 17 percent
NEW YORK – Net income at Wall Street firm Morgan Stanley rose 17 percent in its fiscal first quarter on record revenues stemming from growth in both investment banking and fixed-income trading.The company said Wednesday that during the quarter ended Feb. 28, it $1.64 billion, or $1.54 per share, up from $1.4 billion, or $1.29 per share, in the first quarter of 2005.Revenue rose 24 percent to $8.48 billion from $6.84 billion a year ago.Analysts surveyed by Thomson Financial had expected earnings of $1.21 per share on revenue of $7.55 billion.Shares of Morgan Stanley rose $1.13, or 1.9 percent, to $61.54 in midday trading on the New York Stock Exchange. The stock has traded between $47.66 and $62.15 over the past 52 weeks.Morgan Stanley joined rivals Goldman Sachs Group Inc., Lehman Brothers Holding Inc. and Bear Stearns Cos., all of which reported earnings last week, with record quarterly revenues. However, the continued restructuring under Chief Executive John Mack, who took over the job June 30, kept Morgan Stanley from achieving the record income the other firms posted. Like the others, however, Morgan Stanley’s results far outstripped analysts’ predictions.”We have many steps in the right direction to point to,” said David Sidwell, Morgan Stanley’s chief financial officer. “And of course, we still have more work to do.”Morgan Stanley’s institutional securities division saw record revenue of $5.5 billion, up 36 percent from a year ago, on strong gains in investment banking and fixed-income sales and trading. Fixed-income trading, fueled by successful commodity trades, rose 36 percent year-over-year, a very strong gain considering that other Wall Street firms were only able to eke out minimal increases in a difficult trading environment.Sidwell said that the company will continue taking increased risks in trading, as quantified by average trading value at risk, or VAR. Morgan Stanley’s average VAR, the amount of money it could lose in a day’s trading, was $84 million in the first quarter, up from $81 million in the fourth quarter and $78 million in the third quarter.In Morgan Stanley’s retail brokerage arm, which is undergoing an extensive reorganization, net revenue rose 4 percent to $1.4 billion. Higher fees were offset by lower transaction volumes in customer accounts, the company said. The company has cut 1,471 jobs in the brokerage division over the past year as it laid off poor performing brokers. Sidwell called the division’s progress slow, but improving.Revenue in Morgan Stanley’s asset management division was flat year-over-year at $695 million, while the Discover card division saw a 14 percent increase in sales to a record $1.09 billion as changes in the nation’s bankruptcy laws last October resulted in fewer charge-offs. Sidwell warned, however, that as the company institutes higher payment minimums in the second quarter, the division could see higher losses as consumer struggle to pay their credit card bills.Morgan Stanley’s board of directors announced a quarterly dividend of 27 cents per share, payable April 28 to shareholders of record on April 13.After the earnings report was released, Prudential Securities upgraded Morgan Stanley’s stock to “equal weight” from “underweight.”The earnings report came just as The Wall Street Journal reported that Morgan Stanley was cutting 50 to 60 jobs in its U.S. and European stock research departments. Some of those jobs and resources will be allocated to faster-growing Asian and emerging markets research.The company also said in a regulatory filing Wednesday that it has offered to purchase TransMontaigne Inc., a supply chain management company for the energy and chemical industries, for $8.50 per share, or approximately $379 million. Morgan Stanley already owns about 10 percent of the company.TransMontaigne surged $1.73, or 23 percent, to $9.15 in midday trading on the NYSE.
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